Investor Presentation 2012 Full Year Results February 2013 Presenters: Andrew Smith CEO Phillip Friery CFO 1
2012 Full Year Highlights Gross Sales up 14.9% to $368.7m (2011: $321.0m) EBITDA (i) up 13.7% to $93.0m (2011: $81.8m) Bledisloe contributed $13.0m in EBITDA (i) $3.0m ($3.5m annualised) including synergies of Earnings improvement in pre-need funds under management used to offset the future service delivery liability Operating earnings after tax (i) up 16.7% to $42.5m (2011: $36.4m) Margin leverage achieved even though there was further investment in marketing, digital business and management capability (i) This is non-ifrs financial information 2
2012 Full Year Highlights Statutory earnings per share increased 58.6% from 25.6 cents to 40.6 cents per share Completion of Tuckers acquisition in December 2012 and Resthaven (NZ) in February 2013 Final dividend 19.0 cents, full year 34.0 cents - payout 88% of operating earnings after tax (i) This is non-ifrs financial information 3
2012 Half Year Highlights (continued) Revenue growth pillars evident in 2012: - Favourable Demographics - Pricing / average contract values - Market share improvements - Prepaid contracts - New locations - Business acquisitions Margin leverage achieved on comparative businesses Business model is re-affirmed 4
Financial Highlights Result highlights: Group (Excluding Bledisloe) Growth on PCP Bledisloe Total Group Growth on PCP Total sales to external customers $299.3m 5.8% $69.3m $368.7m 14.9% Operating EBITDA (i) $80.0m 6.3% $13.0m $93.0m 13.7% Operating Margin 26.7% 0.1% 18.8% 25.2% (0.3%) Operating earnings before tax (i) $55.3m 7.3% $5.1m $60.5m 15.4% Income tax on above operating earnings (i) ($16.4m) (1.9%) ($1.6m) ($18.0m) (12.5%) Effective tax rate 29.7% (2.8%) 30.5% 29.7% (0.8%) Operating earnings after tax (i) $38.9m 11.7% $3.6m $42.5m 16.7% Operating earnings after tax per share (i) 35.5 cents 7.5% 3.3 cents 38.8 cents 12.5% Net profit after tax attributable to InvoCare shareholders $41.6m 48.8% $2.9m $44.5m 64.7% Basic earnings per share 38.0 cents 43.2% 2.7 cents 40.6 cents 58.5% (i) Non-IFRS financial information 5
Bledisloe Business Sales $69.3m (Aust $39.1m; NZ $30.2m) Business integration completed $3.5m of annualised synergies with $3.0m realised in 2012 Estimated annualised operating EBITDA (i) for 2012 was $13.5m Bledisloe will not be separately reported for 2013 and beyond Launched Simplicity & White Lady in New Zealand in 2012 (i) Non IFRS financial information 6
Operational Highlights 2012 2011 Change $'million $'million $'million % Sales Revenue Australia 288.3 273.5 14.8 5.4% Singapore 10.6 9.5 1.1 11.6% Comparable businesses 298.9 283.0 15.9 5.6% Bledisloe 69.3 38.1 31.3 Tuckers 0.4 0.0 0.4 Total Sales 368.7 321.0 47.7 14.9% EBITDA Australia 74.5 70.3 4.2 5.9% Singapore 5.4 4.9 0.5 10.5% Comparable businesses 80.0 75.3 4.7 6.2% Bledisloe 13.0 6.5 6.5 Tuckers 0.1 0.0 0.1 Total EBITDA 93.0 81.8 11.2 13.7% 7
Operational Highlights (continued) 2012 2011 Change % Margin on sales % % % Comparable businesses Australia 25.8% 25.7% 0.1% Singapore 51.2% 51.7% (0.5%) Comparable businesses 26.8% 26.6% 0.2% Bledisloe 18.8% 17.2% Tuckers 13.3% Total % Margin on sales 25.2% 25.5% (0.3%) Comparable business margin improvement even after further investment in marketing, digital business and management capability Lower margin Bledisloe business has improved but lowers overall Group margin Tuckers margin of 13.3% is on 20 days trading, 21% expected on an annualised basis 8
Operational Highlights (continued) Comparable Australian Funeral Market Funeral sales up 6.3% to $226.8m Case volumes up 1.5% on PCP. Estimated number of deaths up 0.9%. Market share growth maintained despite increased competition Increase in average contract values of 4.3% below average price increases due to slight mix shift driven by: Where deaths have occurred (higher number of deaths in Qld) Brand mix (Simplicity performed well) Margin leverage achieved 9
Operational Highlights (continued) 10
Operational Highlights (continued) 40,000 New Zealand - Deaths By Year Source: Statistics New Zealand 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Actual Deaths Year to 30 Sep 2012 Forecast of Deaths - median probability IVC Cases year to 30 Sep 11
Operational Highlights (continued) Singapore Funeral Market (in local SGD currency) 2012 vs 2011 Full Year Revenue 11.3% to $13.7m EBITDA 9.6% to $7.0m EBITDA Margin (0.8%) to 51.3% Av. Contract value 11.1% (packages) Case Volume 0.1% Expansion of business into lower margin retailing of funeral accessories Funeral case volumes flat offset by average case revenues up 11.1% 12
Operational Highlights (continued) New Funeral Locations Annualised benefit from 4 locations opened in 2011 3 new locations opened across Australia and NZ in 2012 Further 4 locations planned for 2013 13
Operational Highlights (continued) Comparable Cemeteries & Crematoria Market Sales revenue up 4.5% to $71.4m At need service volumes increased 2.7% increase in deaths in NSW & QLD markets and small increase in market share SE QLD remains price competitive but volume growth achieved Memorial sales positively impacted by strong H2 sales especially of larger contracts (> $15K) up 6% vs 2011 Trend of lower memorialisation rate impacted by increase in no service no attendance cremations Increase in deferred revenue pool with new contracts for unbuilt memorials exceeding previously deferred construction activity 14
Operational Highlights (continued) Total Prepaid Funeral Sales & Redemptions 2012 v 2011 2011 v 2010 Number of contracts sold 5.5% 17.4% Average contract value 7.8% 2.2% % by which new contracts exceed redemptions 12.4% 20.1% % of IVC's Australian funerals that were prepaid 13.7% 13.2% 15
Operational Highlights (continued) Prepaid Funds Under Management 2012 2011 % of FUM in equities 8% 8% % of FUM in property 17% 9% % of FUM in cash & fixed interest 75% 83% Net pre-tax loss on undelivered contracts $0.0m ($13.5m) Comprising: FUM Earnings $17.6m $2.1m Service delivery liability increase ($17.6m) ($15.5m) FUM earnings supported by fixed term deposits and property investments. Medium term challenge to replace maturing high yielding deposits Liability increase linked to annual price increases 16
Operational Highlights (continued) Investment in Digital & Social Media Investment in HeavenAddress: a leading, respectful on-line memorial solution $5m invested in Q1 2013 for next phase of development IVC has 34% shareholding in HeavenAddress Now attracts approximately one third of all funeral internet traffic in Australia, NZ and Singapore HeavenAddress generating approximately one million hits p.a IVC brands represent 75% of the brand exposure in HeavenAddress Product innovation with tributes, messages and photos posting from HeavenAddress into social media sites 17
Operational Highlights (continued) Investment in Digital & Social Media (continued) Redefining digital business strategy to support customer experience: Roll out tablets and smart phones for front end customer support Trial of mobile arranger service in small market Launch of online funeral arrangements: MyMemorial.com.au, Funeralorganiser.com.au White Lady and Green Endings use Twitter Feeds and Facebook community pages 18
Financial Highlights Result highlights: 2012 2011 Change $ 000's $ 000's $ 000's % Total sales to external customers 368,652 321,113 47,539 14.9% Other revenue 6,852 6,383 469 7.3% Operating expenses (i) (282,478) (245,694) (36,784) 15.0% Operating EBITDA (i) 93,026 81,802 11,224 13.7% Operating Margin 25.2% 25.5% (0.3%) Depreciation and amortisation (16,360) (13,746) (2,614) 19.0% Finance costs (16,262) (15,092) (1,170) 7.8% Interest income 780 729 51 7.0% Business acquisition costs (731) (1,309) 578 (44.2%) Operating earnings before tax (i) 60,453 52,383 8,070 15.4% Income tax on above operating earnings (i) (17,974) (15,977) (1,997) 12.5% Effective tax rate 29.7% 30.5% (0.8%) Operating earnings after tax (i) 42,479 36,406 6,073 16.7% (i) Non-IFRS f inancial inf ormation 19
Financial Highlights (continued) Result highlights: 2012 2011 Change $ 000's $ 000's $ 000's % Operating earnings after tax (i) 42,479 36,406 6,073 16.7% Operating earnings per share (i) 38.8 cents 34.5 cents 4.3 cents 12.5% Net (loss) on undelivered prepaid contracts after tax (i) (13) (9,434) 9,421 (99.9%) Asset sale gains after tax (i) 2,116 142 1,974 Non-controlling interest (103) (103) 0 Net profit after tax attributable to InvoCare shareholders 44,479 27,012 17,467 64.7% Basic earnings per share 40.6 cents 25.6 cents 15.0 cents 58.5% Dividends Interim ordinary dividend per share 15.00 cents 13.50 cents 1.50 cents 11.1% Final ordinary dividend per share 19.00 cents 16.25 cents 2.75 cents 16.9% Total ordinary dividend per share 34.00 cents 29.75 cents 4.25 cents 14.3% (i) Non-IFRS financial information 20
Financial Highlights (continued) Operating Costs Operating Costs $282.5m, up 15.0% from 2011: $245.7m Comparable business $225.5m up 5.5% from 2011: $213.6m Highlights: Base labour rate increases generally contained to approx. 3.5% Expanded management capability (COO Australia, CIO and other senior functional roles in digital business, finance and operations) Increased marketing spend to support brands Radio, TV and sponsorships Increase in digital media spend: Google Ad-words Supplier cost management lowered cost of goods sold 21
Financial Highlights (continued) Finance Costs Finance costs up due to Bledisloe acquisition to $16.3m (2011: $15.1m) Gains on asset disposal Sale of St Kilda Le Pine site in H1 for $2.6m ($1.8m after tax gain) Settlement of the Brunswick property sale due in Q2 2013. - Proceeds $4.7m and $1.8m before tax gain expected upon settlement 22
Financial Highlights (continued) Cash flow highlights 2012 2011 Net cash inflows from operations $53.2m $44.0m Purchase of property, plant & equipment ($18.4m) ($16.7m) Proceeds from sale of property, plant & equipment $3.3m $0.7m Proceeds from sale businesses - $7.2m Purchase of businesses (including property) ($9.3m) ($44.5m) Deferred employee share plan purchases ($1.2m) ($1.2m) Net increase / (decrease) in borrowings $7.1m $25.4m Proceeds from issue of shares - $11.2m Payment of dividends ($34.4m) ($25.5m) Conversion of Operating EBITDA to ungeared, pre-tax cash flow 95% 92% 23
Financial Highlights (continued) Capital Management Dividends Fully franked final dividend of 19.0 cents per share (2011: 16.25 cents) Record date 15 March 2013 Ex dividend date 18 March 2013 Payable date 5 April 2013 DRP remains activated for final dividend and shares will be purchased on market Dividend payout ratio 88% out of operating earnings after tax 24
Financial Highlights (continued) Capital Management (continued) Banking Facility & Hedges Net debt $217m (June 2012 $211m; Dec 2011 $208m) 91% of debt hedged with floating to fixed interest rate swaps (June 2012 90%; Dec 2011: 94%) Headroom debt available $37m Covenant ratios comfortably met Effective interest rate 6.7% inclusive of swaps, fees & margins First 3 year tranche of multi-currency bi-lateral debt facility rolled over for a further 45 months in December 2012 25
2013 Outlook & Beyond Case volumes in the first six weeks of 2013 have been flat year on year Improvement in memorial sales adding to deferred revenue Sustained improvement in returns on funds under management Continued investment in advertising, marketing and digital business 2013 estimated combined impact of Tuckers and Resthaven: Sales $8.3m, EBITDA $1.6m Smaller acquisition discussions continue, with no certainty on success or timing New funeral homes planned across NSW, Qld, SA & NZ Caution using early weeks of H1 as indicator of H1 or 2013 full year result 26
Summary Another year of sustained growth: Bledisloe integration complete Solid growth achieved in comparable businesses and earnings per share Leverage maintained with increased investment in marketing, digital business and management capability Funds under management earnings improved 2 new acquisitions: Tuckers (December 2012) and Resthaven (February 2013) to support growth in new markets Proven business model with robust pillars of growth 27
Disclaimer This presentation contains forward looking statements, which may be subject to significant uncertainties outside of InvoCare s control. No representation is made as to the accuracy or reliability of these forecasts or the assumptions on which they are based. Actual future events may vary from these forecasts. 28
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